BAM Key Details:
- The latest quarterly report from the National Association of REALTORS® (NAR) shows nearly seven out of 10 (152 of 221) U.S. metros saw home price gains in Q1 2023 as 30-year fixed mortgage rates hovered between 6.1% and 6.7%.
With 30-year fixed mortgage rates bouncing between 6.1% and 6.7% in the first quarter of 2023, nearly 70% (152) of the 221 metros with sufficient data saw home prices go up.
Seven percent of them—down from 18% in Q4 2022—experienced double-digit increases.
Compared to a year ago (Q1 2022), the national median single-family existing-home price for Q1 2023 slipped 0.2% to $371,200, while in the previous quarter (Q4 2022), the national median price climbed 4.0% year over year.
Those numbers come from the latest quarterly report from the National Association of REALTORS® (NAR), which highlighted nationwide as well as regional home price appreciation in the first quarter of 2023.
Prices climb in South & Midwest but slip in West and Northeast
At 46%, the South had the largest share of single-family existing home sales in Q1, along with the second-highest rate of annual home price appreciation at 1.4%. Home prices in the Midwest rose 2.9%, while prices fell 0.1% in the Northeast and 5.3% in the West.
Generally speaking, home prices are lower in expensive markets and higher in affordable markets, implying greater mortgage rate sensitivity for high-priced homes.
Yun also pointed out the price drops of 10% or more in West metros like San Francisco, San Jose, and Reno—compared to price increases of 10% or more in metros like Milwaukee, Dayton, and Oklahoma City.
Home prices are also lower in cities that previously experienced rapid price gains. For example, home prices grew an astonishing 67% in three years in Boise City and Austin through 2022. The latest price reductions in these areas have improved housing affordability and led to some buyers returning given the sustained, rapid job creation in their respective markets.
Pandemic boomtowns saw some of the biggest annual declines in home prices in Q1:
- Austin (-13.5%)
- Boise (-10.3%)
- Phoenix (-7.3%)
That said, with housing supply still frustratingly low, price declines will likely be short-lived. In fact, multiple sources show home prices trending upward, and multiple offers—especially on affordable homes—are on the rise, making Q2 the best time of the year to sell homes.
Housing inventory in Q1 averaged 1,630,000 listings—down 40% from Q1 2019, a year before the start of the COVID-19 pandemic.
Top ten metros with the largest annual home price increases
The top 10 U.S. metros with the largest annual home price increases all experienced gains of at least 11.7%. Three of those markets are in Wisconsin, and two are in North Carolina:
- Kingsport-Bristol-Bristol, Tenn.-Va. (18.9%)
- Oshkosh-Neenah, Wis. (16.5%)
- Warner Robins, Ga. (16.2%)
- Burlington, N.C. (14.7%)
- Elmira, N.Y. (14.7%)
- Oklahoma City, Okla. (14.7%)
- Milwaukee-Waukesha-West Allis, Wis. (13.7%)
- Appleton, Wis. (12.4%)
- Hickory-Lenoir-Morganton, N.C. (12.0%)
- Santa Fe, N.M. (11.7%)
Top ten most expensive U.S. markets
Seven of the 10 most expensive U.S. markets were in California. Those top ten include—
- San Jose-Sunnyvale-Santa Clara, Calif. ($1,618,400; -13.7%)
- Anaheim-Santa Ana-Irvine, Calif. ($1,195,500; -5.1%)
- San Francisco-Oakland-Hayward, Calif. ($1,192,600; -14.5%)
- Urban Honolulu, Hawaii ($1,029,000; -8.8%)
- San Diego-Carlsbad, Calif. ($880,000; -2.8%)
- Salinas, Calif. ($863,900; -6.8%)
- San Luis Obispo-Paso Robles, Calif. ($850,200; -3.8%)
- Oxnard-Thousand Oaks-Ventura, Calif. ($844,800; -5.6%)
- Boulder, Colo. ($836,900; -2.6%)
- Naples-Immokalee-Marco Island, Fla. ($777,000; 4.3%)
Quarterly home price declines in 31% of the metros in NAR’s study
Home prices slipped from the previous quarter in about three in 10 of the metros studied (31% or 68 of 221). And compared to Q4 2022, when mortgage rates hovered around 7%, housing affordability has seen a modest improvement.
The monthly mortgage payment on a typical single-family home, assuming a 20% down payment, was at $1,859 in Q1—down 5.5% from the fourth quarter of 2022 ($1,967) but 33.1% (or $462) higher than a year ago.
Also, in Q1, mortgage payments took 24.5% of the typical household income—down from 26.2% in Q4 2022 but up from 19.5% a year earlier.
Quarterly drop (but annual climb) in monthly mortgage payments for starter homes
Quarterly declines in home prices and mortgage rates made it slightly easier for first-time buyers to purchase a typical home in Q1. The monthly mortgage payment on a typical starter home valued at $315,500, assuming a 10% down payment, dropped to $1,825—down 5.4% from $1,930 in Q4 2022 but 32.5% (almost $450) higher than a year ago ($1,377).
For these first-time home buyers, the monthly mortgage payment took 37% of their household income—down from 39.5% in Q4 2022. For context, a mortgage is typically deemed unaffordable if the monthly payment takes more than 25% of household income.
Looking at this from another angle, a buyer needed a qualifying income of at least $100,000 to afford a typical mortgage with a 10% down payment in 33% of U.S. markets—down from 38% in Q4 2022. In 10% of those markets—up from 8.6% in the previous quarter—a buyer needed a qualifying income of under $50,000 to afford a home.
Top takeaways for real estate agents
With home prices rising and inventory low, make sure potential sellers in your area know that we’re now in the middle of the best time of the year to sell. Show them the research—along with the best sources of reliable information on the housing market—and ask if they wouldn’t mind you sending them regular updates on their local market.
Be the first to let them know about home sales in their neighborhoods, so they can have a clearer idea of what to expect—not just in terms of final sale prices but also how many offers the seller received and whether the home sold for an amount over the asking price.
Also, keep your buyers informed of new homes coming soon to the market and what kind of competition they can expect.